CCI announces New Definitions to combat Predatory Pricing. What is it?

CCI implements strict regulations to limit predatory pricing in e-commerce, eliminating market value as a standard and updating cost definitions.

CCI has released new regulations to clarify the method it will use to compute the cost of a product or service to assess whether a company is practicing predatory pricing.

What does Predatory Pricing mean?

According to Section 4 of the Competition Act, 2002, predatory pricing refers to selling goods or offering services at a price lower than the production cost to lessen competition or remove rivals.

Antitrust regulations ban predatory pricing as an exploitative behaviour exhibited by a dominant company.

The Cost Regulations 2025 create a versatile, cost-ceSntered framework applicable to multiple sectors, encompassing the digital economy as well.

Revised cost definitions: A product or service's cost is currently defined as its Average Variable Cost (AVC). Average variable cost is calculated by dividing the total variable cost by the total output for a specific period. In this context, the total variable cost signifies the overall cost (covering all elements involved in producing that good or service) less the fixed cost and fixed overheads linked to the product.

No metrics specific to sectors: The CCI opted not to utilize sector-specific definitions of costs and instead chose to assess them individually, allowing the commission to take into account the distinct characteristics and changing dynamics of digital markets when examining claims of predatory behaviour.

Market value not recognized as cost standard: It was proposed that CCI ought to take market prices into account rather than internal expenses to evaluate predatory pricing, particularly in sectors with atypical pricing structures. However, according to CCI, the market price does not genuinely reflect the cost, and it will keep relying on actual production costs for evaluation, as this is more precise.